Chile Forum

Chile Forum in English for Gringos, Expatriates, and Travelers to Exchange Ideas and Information about Chile, South America. For more than a decade, the Chile Forum has been the center for expats to share their collective knowledge and experience about living in Chile. The Chile Forum is a free community service brought to you by the law office of Spencer Global.

Metals are a hedge against inflation, bank failure, negative interest rates, etc. Prices of precious metals are long term stable, making them an excellent store of value.

Standard theory out of the book. Hedge against inflation ? .. untrue; look at prices over the last few years. Stable ? .... see previous comment.
What about massive buy / sell margins ? What about physical risks of storage ? Prefer to buy gold certificates?.... can you really trust the company issuing the cert ?

It is really hard to find any better long term hedge against inflation, than a good property

Metals are a hedge against inflation, bank failure, negative interest rates, etc. Prices of precious metals are long term stable, making them an excellent store of value.

Standard theory out of the book. Hedge against inflation ? .. untrue; look at prices over the last few years.
Stable ? .... see previous comment.
What about massive buy / sell margins ? What about physical risks of storage ? Prefer to buy gold certificates?.... can you really trust the company issuing the cert ?

It is really hard to find any better long term hedge against inflation, than a good property

Good comments.

Instead of saying that gold has a stable price, I should have said that gold has a stable "purchasing power" over the long term.

I don't buy and sell gold, but buy and hold and pass to kids.

Gold certificates are not interesting. I don't understand how there can be 500 times as many gold certificates as there is physical gold. Too much counterparty risk.

I agree that property can also be a good investment. But it is not without risk. Your local government can change your zoning, or raise your property taxes. Gangsters can move in. The neighborhood may turn into a slum. There are floods, fires, earthquakes, and hurricanes.

so i was curious just what gold vs. property (in chile) looks like, in terms of returns.

by luck I happen to have a property, bought in 2007, nothing particularly special about it. not bad, not great, not even in a high demand area. i like it for a lot of reasons, but also leaves a lot to be desired.

what is special about it, for the purposes of these calculations, is there is neighboring property about half km down the road going up for auction this month. otherwise this would be a hard comparison to make, without doing a whole lot more homework.

so, keep in mind this is a very one off, particular, anecdotal attempt at a comparison. very back of the napkin. however, i think would hold in general, depending on where and when you bought. however, this time period stretches across all the unique financial and economic circumstances that have occurred in recent history. pre-2008 crisis, post QE global rate cuts, and commodity booms, busts, booms, and busts again, etc, etc.

so paid almost exactly $16,000 u.s. (8 million pesos) for 2 hectares (4 million per hectare) in 2007. the dollar peso was also almost exactly 500 to the dollar as i recall, and historical peso charts seem to support that as the peso danced around 500 to like 540 in 2007. FYI, zoned rural agro so no property taxes for 12 years to add in to cost of ownership.

what would have happened had I bought gold instead at that time?

for simplicity, i have also grabbed the highest price of 2007 for gold, which looks like it was around $849.

$16,000 would have bought me about 18.84 ounces of gold then.

the highest price in 2019, which pretty much right now $1,334, that would have given me $25, 347. or an increase of 58% .

now the property down the road is 5,000 square meters, minimum bid is 7 million pesos. i wont know until the auction is done what it really went for (will update this when i know). however, in my experience with auctions they typically sell at about 2 to 3 times the minimum. so i am going to post calculations based on 7 milliin, and twice that. I actually think the market price could be a lot higher, outside an auction situation; but, that would be speculation on my part for the moment. in any case i always like the auction prices for valueing property over market, because it is a fast liquid, 5 mins of bidding, minimum value.

so, assuming 28 million pesos for 2 hectares to start, or $40,579 u.s. at 690 (not good on the exchange rate front right now). that looks to be about a 153% increase.

or, just for argument, it goes for twice the minimum bid price, my property in dollars would be $81,000 for a return of 406%

now i know there is a whole lot of ways to run these numbers. for instance, could of used the highest gold price in history after the 2008 crisis, or lowest the property price, etc. that also would have involved cristal ball reading. gold could have gone to $5,000 plus an ounce, or chile could have collapsed after the 2010 earthquake, or, or, or. I also can not put two hectares in my pocket. 18 ounces, probably uncomfortable in a pocket, but still more portable than land.

this is just an attempt to put it in perspective what we are talking about.